/Are state-guaranteed youth mortgages viable in Spain?
Are state-guaranteed youth mortgages viable in Spain?

Are state-guaranteed youth mortgages viable in Spain?

The lack of financial availability prevents many young people from being able to buy a house or a flat in Spain. There are already several companies and organizations that have asked that this situation be resolved as soon as possible. In this sense, a debate has been opened about the advisability of the State endorsing the loans to acquire housing.

Access to housing for young people has already been requested by the Association of Builders Promoters of Spain and Banco Santander. The Popular Party also recently did so, which has expressed its intention to take the proposal to the Congress of Deputies.

In this way, the Young people could obtain financing for up to 100% of the total price of the house instead of the usual 80%. Young couples and new owners would no longer have to contribute the remaining 20% ​​as is currently the case.

The question is whether this measure is appropriate and how it could be applied in Spain. According to HelpMycash.co , these guarantees would not only have a favorable reception but would “facilitate the purchase of many millennials who, despite having a good job, still don’t have much money saved ” .

The financial comparator has reached this conclusion after consulting the opinion of economists and potential buyers.

What happens if the young person does not pay the mortgage?

But, part of the political debate on the subject is: what could happen if the young person guaranteed afterwards cannot pay his mortgage? As is logical to think, the State would have to assume the responsibility of paying the bank 20% of the remaining amount of the property. That is, the amount of money that was guaranteed.

On this point, the PP has not specified the scope of the responsibility that the State would assume in the event of a possible non-payment of credit. Although, HelpMyCash, considers that said responsibility would be eliminated when the credit holder returns 20% of the borrowed capital.

The political organization is the Latest to join the adoption of state-endorsed youth mortgages. The PP has proposed that the guarantee granted by the State cover 20% of the total mortgage requested by the new owners.

In such a way that, the bank can lend up to 100% of the total cost of the house instead of 80% as it happens now. However, in the Region of Murcia, governed by this political organization, these public endorsements are already being granted to young people.

This scheme The financing method is similar to that used by Banco Santander, which finances more than 80% of the total price of real estate for young people. In fact, the entity grants loans up to 95% of the value of the home. Provided that the applicant has the endorsement of his parents or any other person.

After five years from the moment the mortgage is signed, this guarantee is automatically canceled.

Adequate requirements for mortgage loans

According to the professor and editor of Economipedia David López Cabia, if the measure is approved “it is essential that the economic criteria that will be required of young people to access this aid are well defined.”

The single guarantee would be approved if the young people meet the requirements that banks usually require to grant a mortgage. That is, have a stable job and some seniority. Have sufficient income to be able to pay the loan installments and have an acceptable debt record.

Another point that must be defined in the debate , is the age that young people should be to be able to access this aid. As indicated by HelpMyCash, the PP has established an age group in Murcia between 18 to 34 years old.

Financial sources consulted by the banking product comparator, however, they consider that it would be convenient to increase the age to obtain these guarantees to 37 years . They argue that job instability encompasses many people of that age, who are prevented from being able to save.

HelpMyCash emphasizes that “in case of If the State wanted to limit the price of the property that could be financed with its guarantee, it would be advisable to take into account the reality of the real estate market in each autonomous community ”.

It is known that the prices of real estate for mortgages can vary significantly from one region to another. For example, in the communities of Madrid or Catalonia, house prices are higher than in Andalusia or Aragon.

Agile credit management is required

The impact of a measure of this magnitude will largely depend on the ease with which these mortgage credit guarantees are obtained in Spain. Francisco Coll Morales, editor-in-chief of Economipedia , explained to HelpMyCash the need to “provide the administrative body responsible for approving these guarantees with resources to efficiently manage these types of policies.”

This implies the creation of specific offices to advise young Spaniards who could and would like to apply for the state mortgage guarantee. Even many young people consulted by HelpMyCash propose that the bank itself manage the aid request.

They emphasize that young people who “ Procedures should be simple so as not to make those of us who need to access this measure too dizzy ”.

In the United Kingdom a measure quite similar to the one proposed for Spain has been applied since 2013. The British state endorses up to 95% of the youth mortgages from that country.

Limited youth options

The price of real estate, unemployment and the lack of savings, limit the options of young Spaniards under 35 to have access to a new and adequate home. The immediate consequence of this reality is that young people are forced to delay their plans to marry or emancipate from home.

Right in the At the beginning of the 2008 financial crisis caused by the mortgage bubble, 54% of young people under the age of 29 owned a flat in Spain. The data available for early 2021 indicates that this percentage dropped to 26%, according to the data published by Fotocasa.

Mortgages for young people endorsed by the State could improve this situation and contribute to promoting an essential sector in the Spanish economy such as the construction industry.

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